REPORT DIGEST
CHICAGO STATE UNIVERSITY
Financial Audit,
Compliance Examination and Single Audit
For the Year Ended
June 30, 2011
Release Date: March 22,
2012
Summary of Findings:
Total this audit: 34
Total last audit: 41
Repeated from last audit: 22
State of Illinois, Office of the Auditor General
WILLIAM G. HOLLAND, AUDITOR GENERAL
To obtain a copy of the Report contact:
Office of the Auditor General, Iles Park Plaza, 740 E. Ash Street, Springfield, IL 62703
(217) 782-6046 or TTY (888) 261-2887
This Report Digest and Full Report are also available on the worldwide web at www.auditor.illinois.gov
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SYNOPSIS
• The University had multiple policies addressing the
requirements for a student’s Satisfactory Academic Progress. Further, as a
result of a misapplication of an academic policy that had been suspended,
University officials initially determined that overawards were made to students
totaling $740,030.
• The University did not have appropriate internal controls
to monitor the compliance of the subrecipient of its Head Start Cluster
program.
• The University did not fully comply with compliance
requirements of activities allowed and unallowed, allowable cost/cost
principles, period of availability of Federal funds, and reporting applicable
to the Strengthening Minority-Serving Institution program.
• The University did not prepare a complete and accurate Schedule
of Expenditures of Federal Awards.
• The University did not reconcile its student financial
assistance awards and expenditures on a monthly basis.
• The University did not have adequate controls to ensure
that vendors had not been suspended or debarred from participating in contracts
funded by Federal awards.
• The University did not fully comply with the compliance
requirements related to its grant from the Department of Energy.
• The University did not fully comply with requirements
applicable to its property and equipment.
• The University did not have adequate control over
contracting procedures.
• The University did not follow their policies regarding
their “Incomplete” grade process.
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
SUSPENDED ACADEMIC POLICY RESULTED IN OVERSTATED LIABILITY
ON THE FINANCIAL STATEMENTS
The University had multiple policies addressing the
requirement for a student’s Satisfactory Academic Progress. As a result of a misapplication of the
academic policy that had been suspended, University officials initially
determined that there were overawards made to students totaling $740,030. The
University recorded this as an adjustment to their financial statements. These adjustments included a $134,836
reduction in receivables, a $605,194 increase in liabilities and revenue and
expense adjustments netting to $740,030.
In August 2011, the Department of Education (ED) requested
the University to look into and report back to ED, as to whether the University
improperly awarded Federal aid to students during the past four years.
The University’s enrollment management department calculated
Federal and Illinois MAP overawards to 126 unduplicated students from fiscal
years 2008 through 2010 due to poor scholarship totaling $740,030.
In October 2011, the University reported the results of this
analysis back to ED and recorded various entries on the University financial
statements to record these results. In
December 2011, it was determined that the policy used for this analysis had in
fact been suspended by previous administrations of the University since June
2008.
We performed various procedures to determine the University’s compliance relative to its Student Financial Assistance Cluster. Among those procedures, we selected a sample of 20 students from the 126 students identified by the University as students who improperly received student financial aid. We noted students who received a total of $28,992 (of which $21,668 was aid awarded in fiscal year 2011) of Federal student financial aid and $4,160 of Illinois MAP awards when they were not eligible.
As a result of this testwork,
financial statement adjustments were made totaling $636,345 by the University.
(Finding 1, Pages 22-24)
We recommended that the University improve its
administrative controls to ensure that policies are clearly stated, communicated
and enforced. Further, the University
should report accurate amounts on their financial statements and submit a
revised analysis to the Department of Education.
University officials accepted the recommendation.
NEED TO IMPROVE HEAD START SUBRECIPIENT MONITORING CONTROLS
The University did not have appropriate internal controls to
monitor the compliance of the subrecipient of its Head Start Cluster program.
We inquired with the University as to how it monitors the
activities and compliance of the subrecipient of its Head Start Cluster
program. We were informed that when the
invoice of the subrecipient is received, it is approved by the program director
and is paid. No other monitoring
procedures (such as obtaining audit reports, performing site visits to review
programmatic records and observe operations, or review subrecipient reports)
are performed.
We examined the subaward and
contract. Some of the information that we noted that was not provided to the
subrecipient follows:
• CFDA number and program title,
• Award name,
• Name of the Federal Awarding Agency, and
• Research and development award determination.
Other compliance and internal control issues that were noted
follow:
• The contract did not include any required Federal
certifications.
• The University did not have adequate procedures to ensure
that in-kind matching amounts reported were adequately substantiated by
supporting documentation.
• One expenditure for $48,128 was not approved by the fiscal
officer until 10 days after the check was prepared and the check cleared the
bank two days before approval. (Finding 4, Pages 29-31)
We recommended that the University comply with the Federal
regulations and improve its controls to ensure that appropriate information is
provided to all subrecipients, that all subrecipients are properly monitored,
and all relevant documentation is obtained and retained.
University officials agreed with the recommendation.
COMPLIANCE WITH REQUIREMENTS APPLICABLE TO THE STRENGTHENING
MINORITY-SERVING INSTITUTIONS PROGRAM NEED TO BE IMPROVED
The University did not fully comply with compliance
requirements of activities allowed and unallowed, allowable costs/cost
principles, period of availability of Federal funds, and reporting applicable
to the Strengthening Minority-Serving Institution Program.
Some of the problems noted during our testing follow:
• We tested 25 expenditures totaling $41,945 and noted that
two expenditures were not in accordance with program regulations. One charge for $7,500 was for tour guide
services for 16 students and 2 staff participants in New Orleans. The tours were to include: cultural night in
New Orleans, plantation tour, city tour, swamp tour, D Day Museum, and African
American Museum. The other charge for $390
was for the purchase of 10 iPAD cases. These charges do not meet the criteria of
allowable activities or charges for this program and resulted in questioned
costs of $7,890.
• One payroll expenditure for $1,944 was charged to the
program using a 100% time and effort rate.
However, the effort certification report completed by the employee and
signed by the employee’s supervisor for that month indicated that only 75% of
the employee’s time should be charged to the program resulting in questioned
costs of $486.
• One payroll expenditure for $1,222 was incurred after the
period of availability of the award. The
award expired on March 31, 2011, but the University continued to charge costs
to the award. This resulted in
questioned costs of $1,222. Further, for
this particular award, the University overexpended
the award by $53,658. The University
will not be able to receive a cost reimbursement from the Department of
Education for the overexpended amount.
• The final performance report for the award mentioned above
reported the budgeted expenditures instead of actual expenditures. The total
budget for the project was $1,084,211 and the total expenditures recorded for
the project were $1,137,869. The University indicated on the report that it was
for the period October 1, 2008 until September 30, 2010 instead of the correct
performance period October 1, 2008 through March 31, 2011.
(Finding 5, pages 32-34)
We recommended that the University improve its controls to
ensure that the University complies with requirements applicable to its
Federally funded programs.
University officials agreed with the recommendation.
INADEQUATE CONTROLS OVER PREPARATION OF SCHEDULE OF
EXPENDITURES OF FEDERAL AWARDS
The University did not prepare a complete and accurate
Schedule of Expenditures of Federal Awards (SEFA).
The University provided the auditors its “Final” SEFA on
November 8, 2011. The Notes to the SEFA
were provided on November 9, 2011. We
tested the accuracy and completeness of the SEFA and some of the issues noted
are as follows:
• A pass thru program with a Catalogue of Federal Domestic
Assistance (CFDA) number of 93.575 was identified as
being part of the Head Start Cluster.
There is no such program that is part of the Head Start Cluster.
• An incorrect CFDA number was
reported for one program.
• Two programs passed awards through to sub-recipients
totaling $195,373 that were not reported.
• The Federal Pell Grant Program and Federal Work Study did
not include the administrative cost allowances charged to the program in the
amount reported on the SEFA.
• The notes to the SEFA did not properly report the balance
of Federal Perkins Loans outstanding at year end. (Finding 6, pages 35-37)
We recommended that the University improve its controls over
financial reporting so that it can prepare a complete and accurate SEFA.
University officials agreed with the recommendation and
stated that Sponsored Programs has established new policies and procedures to
ensure compliance with Federally funded program regulations and reporting
expenditures in current fiscal years.
STUDENT FINANCIAL ASSISTANCE NOT RECONCILED ON A MONTHLY
BASIS
The University did not reconcile its student financial
assistance awards (SFA) and expenditures on a monthly
basis.
We requested the University provide us with their monthly
reconciliations of program and fiscal records related to all programs of their
Student Financial Assistance Cluster. The University provided us with
reconciliations for Federal Direct Loan and Federal PELL. All reconciliations,
however, were prepared after the end of the fiscal year and there was no
evidence that records had been reconciled throughout the year. No other
reconciliations of the other SFA awards were
provided. Although a reconciliation of
Federal PELL was provided, certain information used in the reconciliation could
not be verified and agreed to external records. (Finding 8, pages 39-40) This
finding was first reported in 2008.
We recommended that the University properly reconcile all
student financial awards and cost allowances to the University’s fiscal records
for each student financial assistance program on a monthly basis.
University officials agreed the recommendation and stated
that Sponsored Programs has established new written policies and procedures to
ensure compliance with our Federally funded program
regulations and reporting of expenditures in the current fiscal year. (For the
previous University response, see Digest footnote #1)
INADEQUATE CONTROLS OVER SUSPENSION AND DEBARMENT
The University did not have adequate controls to ensure that
vendors had not been suspended and debarred from participating in contracts
funded by Federal awards.
We made inquiries of University personnel to obtain an
understanding of the University’s internal controls relative to suspension and
debarment of vendors. Although the
University added a clause in its standard contract in December 2009, contracts
in place prior to this date did not have this clause. Further, few contracts
were amended to include it when the contract was renewed.
We examined 13 covered transactions totaling $6,632,266 and
noted that four of the contracts tested totaling $863,943 did not include a
vendor certification stating that the vendor was not suspended or debarred and
did not include a clause or condition relative to suspension and
debarment. The University also did not
examine the Excluded Parties List to determine if these vendors were suspended
or debarred. (Finding 12, pages 47-48)
We recommended that the University improve its controls to
ensure that each vendor engaged in a covered transaction is not suspended or
debarred from Federal award programs.
University officials agreed with the recommendation and
stated that they have implemented processes to ensure that all of their
contracts including those that are executed pursuant to a grant renewal contain
all the required certifications.
NONCOMPLIANCE WITH DEPARTMENT OF ENERGY GRANT REQUIREMENTS
The University did not fully comply with the compliance
requirements related to its grant from the Department of Energy (DOE).
We scanned the general ledger for this grant program and
noted that it included an expenditure for retirement
benefits in the amount of $548. However,
the award document specifically disallows indirect costs and fringe
benefits. After this was brought to the
University’s attention by the auditor, the University corrected the entry to
ensure financial reporting was correct.
We inquired whether there were any procurements
in the current year for this program and noted the contract was not signed by
the University until April 29, 2011. The contract states that this contract
term “shall begin on December 1, 2010 and end April 30, 2011.” The University later informed us that this
contract was not a new contract but was intended to be an extension of a
previous contract amendment. Instead of
writing an amendment to the previous contract amendment, they mistakenly wrote
a new contract. As was reported last
year, the first contract amendment was not signed by the University or the
Contractor and was to have expired on August 31, 2010. (Finding 26, pages
72-73)
We recommended that the University improve its controls to
ensure that the University complies with requirements applicable to its Federally funded programs.
University officials agreed with the recommendation.
INADEQUATE CONTROLS OVER PROPERTY AND EQUIPMENT
The University did not fully comply with requirements
applicable to its property and equipment.
We reviewed the University’s property inventory
certification as of March 31, 2011 that was submitted to the Department of
Central Management Services (DCMS). The inventory certification to DCMS
reported 1,840 items ($3,808,329) of equipment that could not be located by the
University. These assets were acquired
by the University over the past 39 fiscal years. Included in this missing equipment were
approximately 950 computers, servers, CPUs, or other electronic storage
devices. In addition, the University did
not perform a detailed assessment and therefore was unable to determine whether
the missing computers contained confidential information.
Some of the exceptions we noted during our audit testing
follow:
• Two items, out of 92 items tested, with a cost of $9,659
could not be located by the University.
These items consisted of a robotic chassis and a tablet computer. The tablet computer was reported as stolen
after the auditors requested to see it.
• One item with a cost of $106,175 was removed from the
property control records. This item was
a book drop and sorter for the new library that was purchased in 2006, but was
never put into service by the University due to software conflicts. In the current fiscal year, the University
returned the item to the vendor for a $15,000 credit on future expenditures.
(Finding 27, pages 74-76)
We recommended that the University locate the missing
equipment. Also, the University should perform a detailed assessment to
determine if any of the missing computers contained confidential
information. Further, the University
should adhere to its procedures and ensure that the property and equipment
records are properly maintained and updated when necessary.
University officials accepted the recommendation and stated
they have taken steps to enhance the control environment by establishing a
corrective action plan.
INADEQUATE CONTROLS OVER CONTRACTING PROCEDURES
The University did not have adequate controls over
contracting procedures.
Some of the issues noted during our testing of 25 contracts
totaling $4,125,909 follow:
• 13 of 25 contracts tested did not contain the minimum
requirements for written contracts.
• One contract totaling $436,892 did not have the signature
of the Chief Fiscal Officer or the Chief Legal Counsel of the University on the
contract.
• One contract amendment ($350,000 increase) exceeded the
$250,000 threshold which required approval by the Board of Trustees. The University could not provide evidence
that the amendment was approved by the Board of Trustees.
• Four contracts totaling $853,362, were dated and
signed by a University official or
vendors’ after the date of the commencement of services. (Finding 28, pages 77-80) This finding was
first reported in 2006.
We recommended that the University establish internal
controls to ensure compliance with the Illinois Procurement Code, State
Statutes, the SAMS Manual and University
policies.
University officials agreed with the recommendation and
stated that their legal department has implemented processes to ensure that all
of its contracts including lease agreements are timely executed by the
appropriate person and that any and all contracts contain the required
certifications. (For the previous
University response, see Digest footnote #2)
INADEQUATE CONTROLS OVER “INCOMPLETE” GRADE PROCESS
The University did not follow their policies regarding their
“Incomplete” grade process.
During our testing of student financial assistance we noted
several students received a grade of “Incomplete”. The University catalog states that students
who request a grade of incomplete must submit an Incomplete Grade Request and
Contract, which requires the student to indicate the reason(s) why she/he was
unable to complete the required course work.
The student’s instructor must indicate the specific work the
student is expected to complete. The
instructor must also indicate a default grade to which the “Incomplete” will
revert if the student does not complete the work by the end of the subsequent Spring or Fall term.
Our testing of 25 students who received an “Incomplete” grade identified
21 (84%) students who failed to submit an Incomplete Grade Request and
Contract. (Finding 30, page 84)
We recommended that the University adhere to or amend its
published policy over the “Incomplete” grade process.
University officials agreed with the recommendation and
stated that the Office of the Registrar has redefined the policies and procedures
to ensure compliance.
OTHER FINDINGS
The remaining findings are reportedly being given attention
by University officials. We will review
progress toward implementation of our recommendations in our next audit.
AUDITORS’ OPINION
Our auditors state the University financial statements as of
June 30, 2011 and for the year then ended, are fairly presented in all material
respects.
WILLIAM G. HOLLAND
Auditor General
WGH:TLK:rt
SPECIAL ASSISTANT AUDITORS
Borschnack, Pelletier & Co. were our special assistant
auditors.
DIGEST FOOTNOTE
#1 STUDENT FINANCIAL AID NOT RECONCILED ON A TIMELY BASIS –
Previous University Response
The University agrees with the recommendation. Sponsored
Programs will work closely with Finance and Financial Aid to establish
interdepartmental policies, procedures and controls to ensure monthly
reconciliation of all student financial awards and cost allowances to the
University’s fiscal records.
#2 INADEQUATE CONTROLS OVER CONTRACTING PROCEDURES -
Previous University Response
The University agrees with the recommendation. The Legal Affairs department has removed outdated contract forms from the intranet and is conducting quarterly evaluations to determine whether updates to the form contract are required. A revised contract form will be posted on the intranet with notice to the University community as appropriate. Purchasing is ensuring that a dual review occurs for all contracts involved with procurement activities that are received in the department for processing.